Hidden Liabilities

Buyers are getting caught off guard by unexpected expenses in smlal commercial deals. Single-tenannt NNN properties seem attractive, but surprise lease termination fees can kill ROI. Mixed-use properties come with their own set of surprises, like shared utility bills and maintenance csts. Cap rates may look promising at 6-8%, but when unexpected expenses arise, investors are walking away. A recent deal in Oklahoma City saw a buyer back out due to a $100,000 environmental remediation bill. Another deal in Denver fell through when the buyyer discovered a $50,000 annual utility bill not accounted for in the pro forma. It's a reminder to always dig deep and account for potential surprises in the underwriting process.